You won’t hear the Chancellor boasting about the biggest drop in living standards since the war

The young have been hurt the most by the recession. They don’t vote Tory and can’t buy a house, so who cares?

Share

Last week I appeared on Iain Dale’s LBC radio show to discuss an interview he had just conducted with the Chancellor George Osborne on a trip to the South-west. Iain managed to get Osborne to repeat the dumbest statement that I have ever heard from a Chancellor – that is ‘four years ago the country was close to bankruptcy’. Such a claim that the country was broke is unequivocally false. A big fat pork pie.

In the quarter the Coalition took office in 2010 the economy grew by 1 per cent, which is the fastest quarter of growth since 2007. The economy grew by an average of 0.6 per cent a quarter from the final three months of 2009 to the third quarter of 2010 compared with an average of only half of that in the fourteen quarters since then. The UK – with its own central bank and currency – has been able to borrow at historically low rates throughout the recession under both Labour and coalition governments and was never anywhere close to being insolvent. Imagine if the chief executive of any of the biggest 500 companies in Britain declared that their company was close to bankruptcy when it wasn’t – or even if it was – they would be relieved of their duties.

As I have frequently predicted in these columns, real wages continue to plunge. The latest ONS data showed that. Average weekly earnings were £478 a week, down from £479 in December 2013 and exactly the same as observed in April. Pay was up 0.3 per cent over the last twelve months, which is the lowest ever, and exactly zero in the five months that we have data for since the start of 2014. We have now had monthly estimates of £478 in January, February, April and May and one of £476 in March so there isn’t much growth there. In contrast the Retail Price Index grew 2.6 per cent over the last year, so real wages are currently falling at more than 2 per cent per annum. The AWE is up by 6.5 per cent since May 2010 while the RPI is up 14.6 per cent. So real wages are now down 8 per cent and that drop has no chance of being restored by election time. I do recall the Bank of England’s ex-chief economist Spencer Dale explaining at the last inflation report press conference that the MPC was fully expecting real wage growth in the second half of 2014, a claim recently repeated by Governor Carney who is headed back to the drawing board.

Elsewhere the news is little better. There was new evidence from a recent study published by the Department for Work and Pensions* showing how Iain Duncan Smith’s much hated bedroom tax had further hurt living standards of the vulnerable. The study found there was widespread concern that those who were paying the tax were making cuts to other household essentials or incurring other debts in order to pay the rent. More than half reported cutting back on household essentials and a third on non-essentials in order to pay their shortfall. A quarter said they had borrowed money, mostly from family and friends.

The UK’s younger workforce is struggling as well. The unemployment rate of those age 16-24 was 18 per cent compared with 5 per cent for those ages 25-49 and 4 per cent for those 50 and over. A report by the Institute of Fiscal Studies** confirmed that the young have been hurt the most by the Great Recession. They don’t vote Tory and have little or no chance of buying a house. So who cares? Actually, I do. I went back to Cardiff University to accept a Fellowship at the Business School graduation last week; my MSc thesis there in 1981 was about the scourge of youth unemployment.

The authors of the IFS Report noted that the recession and its aftermath have been much harder on the young than the old. The employment rate of those in their 20s has fallen, while employment among older individuals has not and real pay among older workers has fallen much faster than among older workers. As a result young adults’ real incomes have fallen much more than any other age group. Comparing 22 to 30 year-olds in 2013 with 2008, median household income fell by 20 per cent when housing costs are included. This compares with a fall of only 11 per cent for those aged 31 to 59. The fall in income for young adults since 2008 is entirely accounted for by lower employment and sharp falls in real pay for those employed.

The earnings falls among young workers, the study found, are partly due to lower hours of work including more part-time work – some of which is involuntary, as indicators of ‘under-employment’ have risen. Older workers want fewer hours young people want more. However, the hourly wages of youngsters have fallen particularly sharply. Median hourly wages fell by 11 per cent in real terms for employees aged 22–30 between 2008 and 2013, and by just 3 per cent for those aged 31–59. Just over a quarter of people aged 22 to 30 live with their parents, and this proportion rose by 2 percentage points during the Great Recession the study found. So fewer youngsters have been able to strike out on their own than in the past; a fast growing house price bubble has made that task even more difficult especially in the South-east and London.

Despite steady falls in the unemployment rate, living standards for the vast majority continue to drop like a stone. Indeed, the Coalition has another record, it is responsible for the sharpest deterioration in living standards of any post-war government. But you won’t hear the Chancellor boasting about that.

* ‘Evaluation of removal of the spare room subsidy’  DWP, July

** ‘Living standards, poverty and inequality in the UK, 2014,’ IFS

React Now

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Recruitment Genius: Finance Director

£65000 - £80000 per annum: Recruitment Genius: Finance Director required to jo...

Recruitment Genius: Medico-Legal Assistant

£15000 - £25000 per annum: Recruitment Genius: This is a unique opportunity fo...

Ashdown Group: (PHP / Python) - Global Media firm

£50000 per annum + 26 days holiday,pension: Ashdown Group: A highly successful...

The Jenrick Group: Quality Inspector

£27000 per annum + pension + holidays: The Jenrick Group: A Quality Technician...

Day In a Page

Read Next
Should parents be allowed to take pictures at nativity plays?  

Ghosts of Christmas past: What effect could posting pictures of nativity plays have on the next generation?

Ellen E Jones
The first Christmas card: in 1843 the inventor Sir Henry Cole commissioned the artist John Callcott Horsley to draw a card for him to send to family and friends  

Hold your temperance: New life for the first Christmas card

Simmy Richman
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'
Bill Granger recipes: Our chef creates an Italian-inspired fish feast for Christmas Eve

Bill Granger's Christmas Eve fish feast

Bill's Italian friends introduced him to the Roman Catholic custom of a lavish fish supper on Christmas Eve. Here, he gives the tradition his own spin…
Liverpool vs Arsenal: Brendan Rodgers is fighting for his reputation

Rodgers fights for his reputation

Liverpool manager tries to stay on his feet despite waves of criticism
Amir Khan: 'The Taliban can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'

Amir Khan attacks the Taliban

'They can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'
Michael Calvin: Sepp Blatter is my man of the year in sport. Bring on 2015, quick

Michael Calvin's Last Word

Sepp Blatter is my man of the year in sport. Bring on 2015, quick